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January 1-7 2007; A week in real estate

By
Real Estate Agent with Keller Williams Realty

Here we are a week into the New Year and looking forward to what will be our lot in 2007. 

2006 was slow with sellers in Prince William County and Fairfax County being unrealistic about how much their home was worth and not taking advantage of the tremendous equity they had gained but wanting more. One of my hardest jobs was telling home owners that they had passed the peak of the market and their home was not worth as much as their neighbour had sold their home for in the late Spring of 2005.

Buyers were starting to be more aggressive and looking for real bargains. Many of them held out until they were sure that the market had bottomed out. No-one wanted to buy and immediately see the value of their new home drop giving them negative equity. They also didn't like the idea of paying taxes assessed on a base much higher than the home was purchased for.

I noticed  that there was a change starting in about late November when people began to realise thet the market had just about bottomed out and if they waited much longer then they'd be on that upswing. Starting first with the new homes where builders were offering such incentives that it was hard to sell resale homes in newer communities like New Bristow Village, Victory Lakes and Morris Farms, the market has slowly begun to change again. Buyers of new construction homes got some tremendous deals with anything up to $70,000 in incentives (upgrades and closing cost assistance) on homes around $500,000 in price just so that the builder could have them off his books by year end.

The great weather we've experienced here in Northern Virginia this first week of January has helped us tremendously. I relisted a townhouse in Virginia Oaks near Gainesville and dropped the price about 3.5% and saw 5 showings between Friday and Monday with another showing tonight about 7pm. Now the market has to be picking up if I'm seeing showings at 7PM on a January evening.

Now if the weather continues to be unseasonably warm I can see that housing market is going to be moving along very nicely.

Begining in early August of 2006 I started to see a lot of increase in the number of  homeowners in financial difficulties. All through the fall I was doing a lot of work on evaluating these homes and determining what the likely selling price would be should the bank foreclose on these folks. At one point in late October I was doing about 10-12 of these every week.

Part of the problem has been the 100% mortgages many of the homeowners took out to buy in a market that had or was close to topping out. Adding in some of the creative financing like Interest only or ARM loans that have started rising in cost due to changes in interest rates and the fact that some people who had a lot of equity started using their house as a credit card with home equity lines and there was a recipe for disaster.

As soon as these folks had payments that were more than they could manage due to job loss or changes in their mortgage rates, or they had to move the drop in prices hit them hard. I've recently seen people who have lost $100,000 on the price of their home and needing to sell owing that much over the possible price to the banks.

I can see a lot of Short Sales, foreclosures and the like happening in early 2007 before tghe market picks up and prices level out.

Comments (2)

Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Hang in there Nigel.

Northern Virginia is fairly immune to market forces.  Sooner or later the "adjustment" period will be over and prices will be down to a range that will attract buyers.

The way I figure it, we have about 10% more to go.

Lenn

Jan 09, 2007 12:29 PM
Home Staging
Reston, VA
Hi Nigel - very informative post.  Its always great to look ahead. Foreclosures will certainly increase due to the reasons you already noted.  Folks are way in over their heads in many markets.
Jan 24, 2007 04:17 AM